Lets get this out of the way upfront: there is no way to objectively calculate what military members “deserve.” Military life can be rough even in peacetime, and the risk and sacrifices expected of military members are even greater during war, or whatever we’re calling this thing now. But it’s misleading to say it’s all sacrifice.
Here is the bottom line on active duty military pay and benefits. They are much, much, much better than anyone realizes, and by “anyone” I really mean anyone. Pay and benefits are probably the best-kept secret in the military and over the last 12 years they have increased at a substantial rate. The Tenth Quadrennial Review of Military Compensation from February 2008 states that
…compensation for members of the uniformed services compares favorably to compensation in the civilian sector, and the differential is substantial when the comparison includes not only cash compensation but also elements of a generous benefits package. But this fact is not well understood by service members in general. While service members tend to understand that their cash compensation compares favorably to the cash earnings of comparable civilians, they do not appreciate the full extent to which their total compensation—including benefits—exceeds that of their civilian counterparts.
This widespread ignorance is problematic for a couple reasons. First, it contributes to military personnel making career decisions without fully understanding what life is like outside the military. Second, it feeds into the myth amongst the military, the general population, and Congress that every facet of military existence is perpetual sacrifice and that the least we can do is pay them more. On several occasions this has even led to Congress tagging an additional 0.5%* across the board pay increase beyond what the Pentagon requested (FTR, this happened under both Bush and Obama). This mentality also discourages us from facing the uncomfortable truth that money put into personnel compensation may be more advantageously spent elsewhere.
Complicating all of that is the convoluted nature of the military compensation system. Pretty much everyone who has studied this issue has stated, in varying degrees, that the compensation system is too complicated to allow for sound policy decisions: the Government Accountability Office, the Congressional Budget Office, the Congressional Research Service, RAND (in at least two reports). Even the Department of Defense says as much in the most recent QRMC and the Defense Advisory Council on Military Compensation. (it should be noted that most of these documents explicitly avoid answering the question ‘How much should we pay the military?’)
So let’s try to break it down a bit. Every report on this topic utilizes a slightly different formula to calculate military compensation, but I’m primarily using the graphics from the 10th Quadrennial Review of Military Compensation, published in February of 2008. Yes, surprise! This is enough of an issue that there is a statute that every four years the President must establish a committee to study the topic and report back to him (incidentally, I’m also enough of a nerd to know that the 11th QRMC has been delayed – my guess is to assure that its findings align with the new fiscal realities within the department).
So, here is what military compensation currently looks like…
Why is this important? Because any time you hear someone talking about military “pay” (basically the right hand side of the pie chart) they are essentially ignoring over half of the monetary value that military members receive.
The term used to describe this 48% of the pay and benefits pie is RMC, meaning “Regular Military Compensation.” After controlling for education, the military is consistently higher than the 70th percentile of earned income. Relatively to this 70th percentile metric, officers have it slightly better than enlisted.
A couple of things to point out in these graphs; First off, for both officer and enlisted there is a steady, predictable increase in take home income. This, of course, will vary somewhat from individual to individual, but based on the fairly standard promotion timelines for service members (especially officers), the military provides an income that places them in the upper levels of their social cohort for the duration of their career. Keep in mind, all of this is before you include the Deferred and Noncash benefits.
You should also note that for the “typical” young enlisted member in the top chart (18-yo, without college) the military provides an additional $10,000 a year over what they could anticipate earning as a civilian for the first few years of their career.
All of this paints a picture of a fairly well compensated military force relative to the general population of the country. However, once you include the monetary value of the additional benefits (the left-hand side of the pie chart above) the picture changes considerably. The term used for the inclusion of the entire benefits and compensation package is MAC: “Military Annual Compensation.”
The income percentile for the military, both officer and enlisted (blue line), jumps up to between the 80th and 90th percentile for the majority of a 20 year career. At the start of an enlisted career, the service member is actually exceeding the 90th percentile income bracket for his cohort. For officers, the movement into the 90th percentile occurs both at the beginning of a career and again beyond the 18-year mark.
So, how well paid is the military? Even if you take out all the Noncash and Deferred benefits listed above and just focus on take-home pay, the military still has it pretty good. There is a longer discussion to be had over the “deferred benefits” (aka retirement), which I discussed at length here and here). But there is a natural tendency to focus on the “take-home” salary of military members – and by doing so, we are inadvertently contributing to a continued narrative of the military being underpaid.
So aside from demonstrating how much I hate America and setting myself up for a brutal comment section, what am I trying to accomplish here? I’m not advocating that we reduce the take-home pay of military members, but we do need to take steps to convey to military personnel, the public and Congress exactly how well compensated the military is relative to the rest of the population. This means taking some basic steps like simplifying the compensation system and updating servicemembers’ LESs so that the monetary costs of benefits is reflected.
In addition, we also need to assure that we are clear-eyed about the impact compensation packages have on the overall budget. Military compensation, like all government spending, should be limited to the minimum amount necessary to achieve goals; in this case the maintenance of a certain quality of life for the All Volunteer Force. The problem is that this has to simultaneously be balanced with the need to maintain adequate personnel numbers and sustain retirement benefits. Unfortunately, no one seems to really want to delve into what that actually means.
For example, in 1999 there was a push to address a “13% pay gap” between the military and their civilian counterparts. The problem is that this number seems to have been largely arbitrary and not the result of a serious analysis (if someone has a study reference for this, please point me to it). On the contrary, the 13% pay gap was actually refuted fairly convincingly at the time by the CBO. Regardless, this lead to a new law that authorized Congress to increase that annual military pay raises by an additional 0.05% beyond the Employment Cost Index every year for the next 6 years in an effort to close this (questionable) gap. [The Employment Cost Index is set by the Bureau of Labor Statistics and is the baseline for annual raises for all federal employees including military]
However, when the six years was over, Congress continued to fund this additional 0.5%* for several more years, even though there was no longer any legal requirement for it and the Pentagon was no longer even requesting it. [In the interest of full disclosure, I personally benefited from several of these pay raises and never once complained]
There are a few indications that the attitude towards pay and benefits is starting to change. The Pentagon has made long overdue changes to the costs of Tricare for both Active Duty and working age retirees. They have also begun prorating ‘Imminent Danger Pay,’ which may have been the single most abused benefit in the history of the DoD. Basically, if you spent a single day out of the month in a hostile area, you were paid an additional $225/month. This meant that the entire military rushed to make it into theater before the end of the month and drug their feet in order to stay in theater until the 1st day of the next month. A finance officer relayed the story of one senior USAF official who made 6 trips into theater in one year, each trip approximately 60 days apart, but conveniently straddling the monthly transition. That means he made an extra $2700 ($225 x 12) that year for a spending a just few weeks in theater (also all tax free if I recall the rules correctly)
I sincerely don’t want to oversimplify this issue. There are myriad reasons why people join the military along with a largely different set of reasons for why they stay. An aspect of that decision is certainly financial. However, to act as if the only way to maintain the status of the all-volunteer force is by perpetually increasing the compensation and benefits for military service members is an indictment of our policy makers’ ability to make sound fiscal judgments and an insult to uniformed personnel. The compensation policies we have pursued over the last decade imply that we think service members are solely motivated by personal financial gains. Let me assure you, this is not true, but the question remains; how much is too much? Where do we draw the line? How much do you pay people when it’s impossible to objectively determine what they deserve?
Also, if you are one of those people who breathlessly criticize slowing active duty military compensation growth and reductions in retiree benefits and the drawdown of personnel, you need to come to grips with the fact that all of these items come from the same ‘pot’ of money. Since it’s now becoming clear that the DoD is going to face a truly flat budget over the next few years that means that this ‘pot’ can no longer grow at the unchecked rates it has over the last decade. That means that from here on out, every dollar that goes into active duty compensation or retiree benefits is a dollar that doesn’t go into maintaining the size of the active duty force. Secretary Panetta has announced the planned drawdown of 80,000 from the Army and 20,000 from the USMC. Ostensibly, this is because we no longer need to sustain forces at these levels, but you have to ask if it is possible that we might “need” these personnel a little more if we could afford to keep them.
* Thanks to Justin T. Johnson (@justinjdc) for pointing out that my pay raise number should have been 0.5%, not 0.05%.